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Gasoline Falls as RINs Drop Before EPA Biofuel Rule Announcement

Gasoline slid to a four-week low as the value for 2013 Renewable Identification Numbers, or RINs, fell before the government announced final requirements for blending alternative fuels.

Futures sank as much as 2.2 percent after RINs touched 85 cents, the lowest since May 28, before recovering to 90 cents at 1:50 p.m., data compiled by Bloomberg show. Refiners must buy the credits in lieu of blending ethanol into gasoline to meet federal requirements. The Environmental Protection Agency today gave refiners and blenders more time to meet the rules and more flexibility.

“This implies they will reduce the requirement in 2014,” said Mark Anderle, a trader at Truman Arnold Cos. in Dallas. “This ruling probably creates more questions than answers.”

Gasoline for September delivery declined 3.69 cents, or 1.3 percent, to $2.9137 a gallon at 1:54 p.m. on the New York Mercantile Exchange, on trading volume that was 50 percent above the 100-day average.

Under the Renewable Fuel Standard, refiners must use a certain amount of renewable fuels each year, with the amount based on their share of the fuel market. Refiners can meet their obligation by blending ethanol into gasoline or by purchasing credits from other producers. RINs are certificates attached to each gallon of biofuel. Once the ethanol is added to petroleum, the blender can keep the RIN to submit to the EPA to show compliance with the law, or trade it to another party.

Renewable Mandate

The EPA today left unchanged this year’s mandate for refiners to use a total 16.55 billion gallons of renewable fuels, while extending the deadline to comply with the 2013 quota by four months, and signaling it plans to reduce the legal mandate of 18.15 billion gallons set for 2014. Refiners have appealed to Congress to eliminate the mandate.

Gasoline was also under pressure as inventories in the week ended July 26 were the highest for this time of year in records going back to 1990, according to data from the Energy Information Adminstration.

The EIA will probably report tomorrow that gasoline stockpiles fell 500,000 barrels last week, according to the median estimate of 11 analysts in a survey by Bloomberg.

Spot gasoline in the Chicago market slipped 1 cent to an 18-cent discount to futures today as BP Plc (BP/) has ramped up rates on the biggest crude unit at its Whiting, Indiana, refinery to 225,000 barrels a day after being shut in November to be rebuilt to process mostly heavy Canadian crude.

Inventory Build

“If there is a big product build this week with Whiting back online, products could get hammered,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “There’s already elevated risk because of what’s going on at Whiting.”

Schenker estimates inventories rose 1.2 million barrels.

The motor fuel’s crack spread versus West Texas Intermediate crude widened 6 cents to $17.42 a barrel. Gasoline’s premium over Brent narrowed 62 cents to $14.61.

Pump prices, averaged nationwide, slipped 0.6 cent to $3.608 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are 1.1 cents below a year ago.

Distillate stockpiles, including heating oil and diesel probably held steady, the survey showed.

Ultra-low-sulfur diesel for September delivery declined 4.8 cents, or 1.6 percent, to $3.0042 a gallon on trading volume that was 22 percent above the 100-day average.

ULSD’s crack spread versus West Texas Intermediate crude slipped 48 cents to $21.15 a barrel. The premium over Brent fell $1.13 to $18.36.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net; Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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